Financial audit of 2004

In March 2004, while PASOK was still in government, Eurostat refused to validate the fiscal data transmitted by the Greek government and asked for a revision, as it had done previously -twice- in 2002, then resulting in a revision which changed the government balance from a surplus to a deficit.

A worse blow came in May 2004, when the European Commission harshly accused Greece of "imprudent" and "sloppy" fiscal policies,^[5] pointing out that since Greek economic growth had been an annual 4% in 2000–2003, a declining fiscal position could only be the result of government mismanagement, including concerns by the EU regarding the 103% public debt to GDP ratio which Karamanlis had inherited from the previous PASOK regime. With this report, the Commission effectively called into question the quality of Greek economic data, as Eurostat had done in March.

The New Democracy government under Karamanlis, elected on April of that year, decided to conduct a Financial Audit of the Greek economy, before sending revised data to Eurostat. The audit concluded that the PASOK administration and prime minister Costas Simitis had falsified Greece's macroeconomic statistics, on the basis of which the European institutions accepted Greece to join the Eurozone. PASOK contested the accusations and claimed that 2006 Eurostat changes to the system of defense expenditure calculation^[6] legitimized the practices of the Costas Simitis government. New Democracy responded that the defense expenditures covered by those changes constituted only a small part of much more substantial expenditures that were fraudulently concealed by the previous PASOK government.

In social policy, the retirement age was raised from 58 to 60 for those with 35 years of insurance, while early retirement went up from 55 to 60 for those who entered the labor market after 1993. Supplementary pensions were also cut. In addition, mothers with under-aged children could retire at 55 instead of 50, while paid maternity leave was extended to 6 months in the private sector. ^[7]

Rising unemployment and the threat of inflation undermined Karamanlis' promises to kick-start the economy and sparked strikes,^{[8][9][10][11]} especially one in 2006 by rubbish collectors,^[12] causing severe disruption in the economy – particularly the one in July 2005 at the height of the tourist season.

In early 2006, it was revealed that the cellular phone of Kostas Karamanlis, as well as those of several other members of the government and officials of the armed forces, had been tapped for several months during and after the 2004 Athens Olympics.^[13] The investigation into this matter by the Greek organization for communications privacy was closed with the argument that if this investigation would carry on, the information revealed would be dangerous for the national security of Greece.

The government has undertaken a 210 million euro program to bolster broadband internet connectivity in provincial Greece, which was approved by the European Commission in 2006 with the commendation that it constituted "the most ambitious broadband development programme that any EU member has ever undertaken".

In matters of social policy, Karamanlis's government has followed a largely liberal policy. In the spring of 2006, the Ministry of Education repealed a law continuously in effect from 1936 (including 20 years of socialist rule), which required approval by the local Orthodox Christian Metropolitan for the building of non-Orthodox houses of worship.

At the outset of the year, prime minister Karamanlis announced the initiative of his government for a new amendment to the Constitution. He stated that one of the central issues of this amendment will be the legalisation of private universities in Greece, operating on a non-profit basis. Greece has for years experienced a mass exodus of "educational immigrants" to other countries' Higher Education institutions, where they move to study; this creates a chronic problem for Greece, in terms of loss of capital as well as human resources, since many of those students opt to seek employment in the countries they studied, after getting their degrees (it is characteristic Greece is by far the leading country in the world in terms of students abroad as a percentage of the general population, with 5250 students per million, compared to second Malaysia's 1780 students per million inhabitants). Proponents of non-state owned Universities claim that the State's constitutionally mandated monopoly on Higher Education is responsible for these problems.

Attempted changes in Greek higher education have encountered fierce opposition from the other parties, as well as from the majority of the academic community, both professors and students. An attempt to pass several changes concerning the operation of Greek universities resulted in large-scale demonstrations, bringing together tens of thousands of protesters, and, finally, the closure of most institutions by protesting students in the summer of 2006. The semester's exam period was lost and postponed until the fall, while the government shelved the changes and claimed that no bill would be put to a parliamentary vote before a more extensive dialogue had been held with students. However, without any further dialogue, the legislation passed in 2007.

2007 re-election

In the 2007 general election, Karamanlis was re-elected with a diminished majority, following the 2007 Greek forest fires that ravaged much of western Peloponnese and southern Euboea. He pledged to continue with his reform and privatization programme as well as form a new Cabinet.

On 19 September 2007, he presented a new cabinet.^[14]

2009 elections

In the 2009 general election, Karamanlis and New Democracy were voted out of the government. He stepped down on 30 November after elections within the New Democracy party for the election of new party leader.